About 70% of acquisitions fail to reach their budgeted goals. How’s that for a frightening statistic, especially if you’re eyeing up a purchase? I don’t share that with you to scare you away from mergers. I share it because it’s important to discuss why most acquisitions fail.
Let me paint you a picture of a typical buyer and seller during an HVAC contractor acquisition or merger. The prospective seller is anxious to sell for a number of possible reasons. He needs the capital, it’s time to retire, the business has been weakened by an economic downturn, they’re running out of cash, or they’re struggling to market their business properly. In short, the seller is ripe to be bought. In addition, as each week goes by, the seller's business is worth less.
The prospective buyer is anxious too--to buy the company. He sees great potential and an opportunity to grow his business and increase profits. He can also be easily enamored with best-case scenarios, and a “sky is the limit” outlook.
In the meantime, both buyer and seller get wrapped up in the complex financial, legal and human resource details that are at the forefront of the merger negotiations. The excitement of the situation coupled with the minutia of the actual merger can distract even the most focused contractors. As a result, in their merger plans they often leave out a major component of future success.
And what’s that missing component? A communication plan for the customers who will be affected by the merger, that’s what. And it’s RISKY to think that customers won’t be affected just because YOU SAY nothing will change. Think about how you’d feel if you received a statement from a new bank without being told there'd been a merger with your old bank.
Unlike your bank, which may or may not have a history of good service, the most appealing contractors to purchase are likely to be those with a good reputation and a history of high-quality customer service. That means their customers (soon to be your customers) are probably happy with the current arrangement. From their point of view, a change in ownership is like upsetting the apple cart--which gives them a good reason to rethink their relationship. And if you don’t handle the communications properly, you could turn your new customers into “free agents.”
That’s why you need to have a communications plan. Here are some things that you should think about when building your plan.
• Communication after a merger is a process, not a single event. If you think you’ve got your bases covered because you’re going to send a “Dear Valued Customer” letter out once, think again. Research shows that it takes at least four personal contacts after a merger to maximize your customer retention. A “one and done” communication plan won’t cut it.
• Remember to answer your customers' question: “What’s in it for me?” A letter or postcard that focuses on how great the new ownership is will not help customers understand why the merger is in their best interest. Above all else you need to focus on the benefits of the merger for the customer. For example, if you now have eight new NATE-certified technicians or plumbing services are now available, share that information with your customers.
• Don’t wait for the deal to be done to develop your communications plan. The plan needs to be in place, or close to it, when the deal has been made. If you wait six or eight weeks after the deal, you'll be way behind. Imagine how one of your own customers would feel if a technician in a strange uniform showed up on a no-cooling call.
In the next article, I’ll share some best practices for how to get the most out of your communications after a merger, and give you a peek at what a successful communications plan looks like.
Blaine Fox, Vice President of Warm Thoughts Communications, is a recognized expert on the residential mechanical services industry. He is currently working with some of the nation’s leading HVAC contractors to improve their marketing, fine-tune their operations and grow bottom-line profits. Previously, Blaine was general manager of ServiceMark, a $32 million HVAC contractor with more than 25,000 service agreement customers. Blaine oversaw 160 field employees, 30 install crews, 12 sales people and a call center that handled 140,000 calls per year. Blaine is a sought-after speaker, and will be presenting at Comfortech 2009. He is also a frequent contributor to HVAC industry trade publications. He can be reached at [email protected]